In the second quarter of this year, 5.6% of all home sales were flips, according to ATTOM Data Solutions’ Q2 2017 U.S. Home Flipping Report. The report defines a flip as a property that is sold for the second time within a 12-month period.
As housing inventory remains low and buyers get more competitive, home flippers are employing a number of strategies to gain an edge and improve their ROI, says Daren Blomquist, senior vice president at ATTOM Data Solutions.
“Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available—often due to foreclosure or some type of distress,” Blomquist says. “Many of these lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals. In the markets where distressed discounts have largely dried up, flippers are showing more willingness to leverage financing when acquiring properties, often purchasing closer to full market value and then relying more heavily on price appreciation to fuel their flipping profits.”
More than 35% of homes flipped in the second quarter were originally purchased by a buyer with financing, the highest level in nearly nine years. The estimated total dollar value of financing for homes flipped in the second quarter was $4.4 billion—also a nearly 10-year high, according to ATTOM Data Solutions’ report. The highest share of home flips purchased with financing in the second quarter were in Colorado Springs, Colo. (68.4%); Denver (56.1%); Boston (53.3%); Providence, R.I. (51.7%); and San Diego (49%).
Meanwhile, one in four home flips nationwide were sold to cash buyers during the second quarter, and 18% were sold to FHA buyers, the study shows. Nevada posted the highest home flipping rate in the nation during the second quarter, with 8.4 percent of all home sales being flips. Washington, D.C., followed with 8.2%, Maryland at 7.4%, Tennessee at 7.3%, and Alabama at 7.3%.